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To Join or Not to Join? Factors Influencing Employee Share Plan Membership in a Multinational Corporation

  • Alex Bryson
  • Richard Freeman

Many firms encourage employees to own company stock through share plans that subsidize the price at favorable rates, but even so many employees do not buy shares. Using a new survey of employees in a multinational with a share ownership plan, we find considerable variation in joining among observationally equivalent workers and explore the reasons for the variation. Participation in the plan is higher the greater the potential pay-off from joining the share plan, which indicates that rational economic calculations affect the decision to join. But there is also evidence that psychological factors affect the decision to join. Some nonmembers say they intend to join in the future, which means they forgo the benefits of immediate membership. The proportion of workers who purchase shares varies across workplaces beyond what we predict from worker characteristics. This suggests that coworker behavior influences decisions. Indeed, workers say that they pay most attention to other workers and little attention to company HR management in their decision on joining.

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File URL: http://cep.lse.ac.uk/pubs/download/dp1001.pdf
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1001.

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Date of creation: Sep 2010
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Handle: RePEc:cep:cepdps:dp1001
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Esther Duflo & Emmanuel Saez, 2000. "Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices," NBER Working Papers 7735, National Bureau of Economic Research, Inc.
  2. Glaeser, Edward L & Sacerdote, Bruce & Scheinkman, Jose A, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 507-48, May.
  3. Gary V. Engelhardt & Brigitte C. Madrian, 2004. "Employee Stock Purchase Plans," NBER Working Papers 10421, National Bureau of Economic Research, Inc.
  4. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2005. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," Discussion Papers of DIW Berlin 511, DIW Berlin, German Institute for Economic Research.
  5. Matthew Rabin., 1997. "Psychology and Economics," Economics Working Papers 97-251, University of California at Berkeley.
  6. John W. Budd, 2010. "Does Employee Ignorance Undermine Shared Capitalism?," NBER Chapters, in: Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options, pages 291-316 National Bureau of Economic Research, Inc.
  7. Oyer, Paul & Schaefer, Scott, 2005. "Why do some firms give stock options to all employees?: An empirical examination of alternative theories," Journal of Financial Economics, Elsevier, vol. 76(1), pages 99-133, April.
  8. Bingley, Paul & Walker, Ian, 2001. "Housing Subsidies and Work Incentives in Great Britain," Economic Journal, Royal Economic Society, vol. 111(471), pages C86-103, May.
  9. Douglas L. Kruse & Richard B. Freeman & Joseph R. Blasi, 2010. "Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options," NBER Books, National Bureau of Economic Research, Inc, number krus08-1.
  10. George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 9-32, Winter.
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